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Zombie Debts - Phantom Credit Card Debt
What is a Zombie Debt? If you think these zombies are scary – wait until you learn about zombie debts – they are even scarier.

It’s almost Halloween but forget about monsters, witches, and ghosts. Something even scarier, is a debt that you believed was gone – that rises from the grave.

Perhaps you settled the debt, and it’s even showing a zero dollar balance on your credit report. Maybe it’s aged past the statue of limitations. Or you may have even gotten rid of the debt through bankruptcy. Our clients at Golden Financial Services will sometimes have a debt dismissed, proven to be invalid or even completely settled and paid off – later getting sold to another unscrupulous debt collector who tries to collect on it illegally. Now that phantom debt – something from your past that you thought was gone – is back! And with a vengeance. It rose from its grave.

Today we will teach you about zombie debts – what they are – how they become zombie debts – why debt collection companies purchase zombie debts – and how to deal with zombie debts.

What are “Zombie Debts” (synonyms: phantom debts, uncollectible debts)?

A zombie debt is a debt that is either legally uncollectible, forgotten about, paid, a settled debt, past the statue of limitations, owned by someone else – such as a deceased person or someone with the same name, or possibly an expired debt.

Can a zombie debt originate from a legitimate debt or credit card account? 

Sometimes a person will stop paying on debt because they lost their job. The debt becomes delinquent enough to where the original creditor will then sell it to a third-party debt collection company so that they can write it off as an uncollectible debt.

The debt collection company cannot collect any money from the debtor due to their inability to pay – so they sell the debt to another collection agency – and it can continue to be sold multiple times. Each time the debt is sold it racks up additional fees and interest. And after on average three years, the debt becomes a zombie debt.

One common characteristic of a “zombie debt” is that abusive debt collectors often use it to make money.

Why do creditors attempt to collect on zombie debts?

Zombie debts can be purchased for as low as three cents on the dollar. A $500 debt can be bought for $15. Due to their inexpensive nature is why unreputable debt collection companies purchase these zombie debts. They know that they can collect a much higher amount than what they paid for it – often by using illegal scare tactics aimed at innocent consumers.

When third-party debt collectors attempt to collect on these zombie debts, the Fair Debt Collection Practices Act and Fair Credit Reporting Act are the first of laws to be broken. Watch the short video below to learn more about these Acts.

How to Deal with Zombie Debts?

If sued by a debt collection company:
Whatever you do in this case, don’t just ignore the lawsuit because you could then end up with a default judgment (AKA: lose the case and possibly have your wages garnished or frozen, or a lien put on your property).
If you just show up at court, in many cases the debt collection company won’t – you will then win the case, and the lawsuit will get dismissed.
I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Noach Dear, a state civil court judge in Brooklyn
Dispute it on your credit reports:
Take a look at your Experian, Transunion and Equifax credit report. See if these debts have been reported and are negatively affecting your credit report and score. If they are, it is imperative to dispute these negative marks. You can dispute them directly with the credit reporting agency. Once they are disputed, the credit reporting agency will then contact the debt collection company – requiring them to provide proof that this is a legally valid debt. If they can’t provide evidence – the negative marks reporting will then come off your credit reports.

Use debt validation:

Debt validation will allow a person to challenge the validity of a zombie debt.

According to Wikipedia, “Debt Validation, or “debt verification”, refers to a consumer‘s right to challenge a debt and/or receive written verification of a debt from a debt collector. The right to dispute the debt and receive validation are part of the consumer’s rights under the United States Federal Fair Debt Collection Practices Act(FDCPA) and are set out in §809 of that act, which has been codified in Title 15, Section 1692-1692p of the United States Code.[1] This debt validation procedure was expected to reduce the incidence of debt collectors dunning the wrong person or attempting to collect previously paid debts.[2]

Learn about a debt validation program by visiting this page next. 

Hire an attorney: 

By hiring an attorney, two common actions can occur. A. the attorney may get the debt dismissed B. an attorney can sue the debt collector, awarding the victim $1,000 per violation.

What if the collection company is harassing you and calling your job? Watch this video. 


Watch this video to find the statute of limitations in your state:


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